Data & Research February 6, 2012

New Yorkers Facing Retirement Crisis

A growing number of New York City residents don’t have enough money to retire, according to a new study.
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A report called “Are New Yorkers Ready For Retirement?”—part of a research initiative by city Comptroller John Liu and the Schwartz Center for Economic Policy at The New School—says that between 2000 and 2009, the percentage of employees in the city who had access to employer-sponsored retirement plans declined from 48% to 40%— below the U.S. average of 53. According to a news release from Liu’s office, in 2009, only 35% of New York City workers were part of a retirement plan offered by employers.  

More than one-third of city households in which the head is near retirement age (55-64) have less than $10,000 in savings and will have to subsist almost entirely on Social Security or will not be able to retire.  

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The report found that employers have become less willing or able to sponsor pensions—a trend that is true across most industries and occupations, and affects New Yorkers of nearly all ages and income groups. The brewing retirement crisis cuts across racial, ethnic and gender lines.  

“The deck is becoming increasing stacked against New Yorkers in their efforts to retire,” said Teresa Ghilarducci, director of the Schwartz Center. “More and more residents now face a choice between retirement into poverty or continuing to work in old age. Without significant policy reforms, the economic reforms tea leaves foretell a decrease in the standard of living for retired New Yorkers.”  

More information about the survey is available at http://www.comptroller.nyc.gov/rsnyc/.

Data & Research February 6, 2012

Few Employees Will Be Prepared for Retirement

Eighty-four percent of polled executives responsible for 401(k) plans say only some or very few employees will be financially prepared for retirement.
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A top goal for 401(k) plan sponsors for the second year in a row is improving employees’ financial planning for retirement, according to the 11th Annual 401(k) Benchmarking Survey conducted by Deloitte, the International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS). Nearly two-thirds of respondents (64%) believe their responsibility includes taking an interest in whether employees are tracking towards a comfortable retirement.   

To encourage plan participants to make better use of their 401(k), nearly half of plan sponsors (49%) are offering features that automatically increase participants’ contribution levels. However, nearly two-thirds (64%) of plan sponsors report that fewer than 10% of participants take advantage of this opportunity.   

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Additional survey highlights include: 

  • Only 15% of respondents surveyed say less than half their employees participate in a 401(k) plan. 
  • The majority of plan sponsors (70%) reported the average age range of participants is between 41 and 50 years old, representing a slight (4%) increase from the 2010 survey. 
  • Compared to the 2010 survey, the average participant account balance has been flat or slightly down. 
  • Auto enrollment continues to grow; 56% of 401(k) plans include an automatic enrollment feature, up 7% from 2010.  

Fee Disclosure  

According to the survey, the majority (79%) of plan sponsors indicate it is quite important or very important to improve understanding of (and potentially reducing) plan fees. Nearly three-quarters (71%) of plan sponsors rated the new fee disclosure requirements as quite important or very important.   

Only 39% of respondents indicate they are very informed and included in the design process when it comes to their ability to deliver the disclosures. More than half (56%) say they are somewhat informed.   

Most respondents (75%) agree or strongly agree they have no difficulty in obtaining a clear understanding of plan and participant fees.   

As the effective date of fee disclosure regulations approaches, 83% of plan sponsors believe their 401(k) fees are competitive.   

A detailed copy of the full survey report is available at http://www.deloitte.com/us/401Ksurvey2011 or http://www.iscebs.org.

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